How do you save money?

Or are you like most of my family and friends and just throw the bulk of it in a “high” interest e-savings account and contribute an arbitrary amount of your income to a high fee RRSP through your banks’ advisor because you didn’t plan first?

I’ve been there! I still am for parts of it but I’m working to fix that and you should too.

What’s my plan to save money?

Ever since I went to the boom town of Fort McMurray, Alberta in 2007, for a University work term, I started to invest in the stock market. This ended up being a very expensive lesson come 2008 but it taught me a lot about managing my savings better and the importance of growth and preservation for your money.

Lately, since I started my actual career after graduating university in 2011 I’ve been following a savings and investment plan. It’s nothing special or complicated but it’s some directions I made for myself to follow to get to my financial freedom. As I’ve stated before my financial freedom doesn’t exactly have an end right now but I know the direction it is in. If you don’t have directions you’re going to find yourself lost in a few years wondering where you are. Along the way I stop and check my bearings. I do this for the same reason anyone travelling far distances would; sometimes when you’re driving through an area everything starts to look the same for hours and hours (like the Prairies in Canada or just the entire north). That is why I check my net worth, for the same reason, I check to make sure when I’m travelling across Canada I’m still going west so I don’t get lost in Saskatchewan. Net worth checks are essentially my mile markers on the financial highway; as long as they’re increasing I must be going in the right direction.

My plan to save money consists of basically three different parts

Contribute to my employer’s matching Group Registered Retirement Savings Plan – Before I even receive my paycheque in my bank account I’m saving. When people talk about paying yourself first this is exactly what they mean. As a benefit from my employer they will match up to 5% of my annual salary if I contribute to my GRRSP. So I take full advantage of this instant 100% ROI and over contribute to the tune of $574 dollars a month. A portion of that is matched by my employer and I save over $10,000 a year without even trying!

Max my TFSA – Every pay cheque I put 20% of my take home salary and put it in my high interest e-savings account. At the beginning of each year, I max out my TFSA and invest it into a mixture of hopefully high growth stocks and some solid dividend stocks. If there’s anything left over, it’ll go into another RRSP or other investments.

Rental Properties – If they stay occupied, they pay for themselves. This allows me to save by paying down the mortgages which grow my assets and thus my net worth.

If I can keep these three parts going consistently for the next few decades, I’ll be able to retire in well under 30 years of working. According to Mr Money Mustache’s math I’ll be able to maintain my wealth and live a level of comfort similar to the one I’m currently enjoying now in perpetuity. Since I have no idea how long I’ll live, the maintenance of my wealth is important because running out of money when you’re 80 would suck if the average life expectancy has increased to 100 through some breakthrough. I don’t know about you, but if I was retired for 25 years I don’t think I’d want to start working again to pay my bills.

So do you have a plan to save money now?

Now tell me how is it you guys plan to save money? If you’re not paying off your debt you need to be saving, you can’t afford not to. The earlier you start putting away money for your retirement the easier it will be when the time comes. If you’re not saving now you’re going to miss out on decades of growth It will be much harder to take advantage of your investment growth with smaller time frames.

You definitely don’t need to match what I’m doing for saving but you need to make yourself a plan. Start with whatever you can manage. Then in 6 months or a year if you haven’t really noticed that money not being spent, increase it by 10%. Keep going like that until you’re retired!

Ok that’s obviously not the only way to start, but it’s one plan to save money. Figure out what you can put away and just start! It’s never too early but it can be too late!

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4 comments

Couple questions I guess.
1) Debt or savings first? Or a little bit of both. The wife and I are not terribly aggressive on either front right now, but paying into both.
2) With the wife and kid, how much harder is it for me to convert an old residence into a rental property and still buy another home? I know that rental is much more long term, but I imagine it is not very easy to acquire another loan when the first property is still out there.Kevin recently posted…Gathering the Magic, Again

#1 depends on your debt, if it’s high interest >5% I’d say pay it down asap, if it’s a low interest loan like a new car payment, you might be better off with some quality investments.

#2 If your finances are in check, you shouldn’t have much of a problem with dependents. You’d be surprised how easy it is to get another mortgage for a second property as long as your first didn’t max out your eligibility. It will also be easier depending on how long you’ve been paying your mortgage and numerous other factors. I’d give a broker a call in your area and ask a few questions. It won’t hurt and you could hear some great things!